The Competition Commission recently conducted an enquiry and initiated proceedings against Proctor & Gamble Pakistan (Private) Limited following a complaint for deceptive marketing practices filed by Reckitt Benckiser Pakistan Limited. The commission found that the respondent had violated Section 10 of the Competition Act 2010 by resorting to deceptive marketing practices.

Facts

The complainant, Reckitt Benckiser Pakistan Limited, is a multinational consumer goods company that provides pharmaceutical, hygiene and household products. It commenced operations in Pakistan in the 1950s. The respondent, Proctor & Gamble Pakistan (Private) Limited, is a multinational company that is involved in the production of consumer goods. It commenced operations in Pakistan in 1991. The complainant and respondent are involved in the production and marketing of anti-bacterial soap under the brand names Dettol and Safeguard, respectively.

The respondent ran an ad campaign, including television ads and outdoor marketing, which claimed that Safeguard was "Pakistan's No. 1 rated Anti-bacterial Soap" along with a disclaimer in fine print that this claim was "Based on [a] product in use test by AC Neilson in April 14 amongst 600+ consumers". Further, a doctor appearing in the television ad suggested that Safeguard protects against germs that cause influenza.

In its objection, the complainant alleged that the marketing material and advertising claim lacked a reasonable basis to substantiate such a claim and, as such, it was tantamount to the dissemination of false and misleading information to consumers (and to the detriment of its competitors) in violation of Section 10 of the Competition Act. In support of its allegation, the complainant submitted AC Nielson's data reflecting the market share in terms of the value and volume of three leading anti-bacterial soaps in Pakistan, which clearly indicated that Safeguard was not the primary leading brand in terms of market share value or volume.

Issues

The Competition Commission considered whether:

  • the claim to be "Pakistan's No. 1 rated Anti-bacterial soap" and materials submitted by the respondent concerning the product's character, properties and suitability for use had a reasonable basis; and
  • the disclaimer "based on [a] product in use test by AC Neilson in April 14 amongst 600+ consumers" was obvious and understandable to consumers and qualified the claim or offset the liability arising out of the claim.

Analysis

With regard to the claim having reasonable basis, the Competition Commission concluded that the concept of reasonable basis requires that an advertiser must, before disseminating information, have a certain level of prior substantiation for the claims made. In this regard, the commission observed the following:

  • Marketing and advertising campaigns and the claims made by an undertaking fall within the ambit of Section 10(2)(b) of the Competition Act 2010 in terms of the distribution of false or misleading information to consumers. Such campaigns and claims must have a "reasonable basis related to a product's price, character, method or place of production, properties, suitability for use or the quality of goods". If a product involves health and safety claims, the advertising claim must have prior substantiation or reasonable basis in terms of competent and reliable scientific evidence.
  • While relying on its interpretation of 'false information' and 'misleading information' in the matter of China Mobile Pak Limited in 2009, the Competition Commission concluded that all representations, whether intentional or unintentional, which are not obvious or easily understandable to consumers, but could influence their purchasing decisions, are materially false. Further, all representations, whether intentional or unintentional, which can give a false impression or idea, or which have the potential to misinform or misguide consumers due to vagueness or omission are materially misleading.
  • Given the nature of the product in question (ie, an anti-bacterial bar soap whose targeted consumers are the general public – in particular, children and mothers), the respondent's contention that its advertising claim and disclaimer were obvious to reasonable consumers was unsustainable. 'Consumer' is understood to mean an ordinary consumer who is the usual, common or foreseeable user or buyer of a product and not the "ordinary prudent man" under contract law.
  • The commission relied on the concept of 'reasonable basis', as explained in its 2010 order passed in the matter of Proctor & Gamble (Pakistan) Limited regarding Head & Shoulders shampoo, in which it was observed that:

"the concept of reasonable basis … provides that the advertiser must have had some recognizable substantiation for the claims made prior to making it in an advertisement. Moreover, in order to determine the general net impression of the claim, the claim cannot be evaluated as an isolated script."

  • The respondent's advertising claim referenced its product's anti-bacterial efficacy and, as a result, the health and safety of its consumers. Such claims must be backed up by competent and reliable scientific evidence. However, the respondent's claims lacked the quality of substantiation associated with health and safety benefits, as the studies and survey reports that the respondent relied on did not remedy the false or misleading claims made therein.

With regard to the obviousness and appropriateness of the disclaimer in the respondent's Safeguard ad, the commission observed as follows:

  • The disclaimer appeared in fine print as a footnote in an attempt to offset or limit liability or qualify the advertising claim; the commission also referenced its China Mobile Pak Limited order, in which it had observed that "it is settled principle that fine print disclaimers are inadequate to correct the deceptive impression. In fact such disclaimers are, in themselves, a deceptive measure".
  • Factors such as prominence, presentation, placement and proximity between an advertising claim and the associated disclaimer are considered to evaluate the effectiveness thereof.
  • Disclaimers must be clear and conspicuous and placed as close as possible to the advertising claim.
  • The respondent's disclaimer at the bottom of the ad was not easily noticeable by or legible or easily understandable to an ordinary consumer.
  • The majority of the television ad and other marketing and advertising campaign materials were in Urdu, whereas the disclaimer was in English and appeared only momentarily in a 30-second ad, which was inadequate to correct the deceptive impression that Safeguard was "Pakistan's No. 1 rated Antibacterial Soap".

Decision

The Competition Commission concluded that Proctor & Gamble had violated Section 10 of the Competition Act by resorting to deceptive marking practices through:

  • the distribution of false or misleading information that was capable of harming the business interests of another undertaking (Section 10(2)(a) of the Competition Act); and
  • the distribution of false or misleading information to consumers, including the distribution of information lacking a reasonable basis concerning the price, character, method or place of production, properties, suitability for use or quality of goods (Section 10(2)(b) of the Competition Act).

Penalties

Considering the violation of Section 10 of the Competition Act and the fact that the respondent had withdrawn the ad campaign, the Competition Commission imposed a penalty of PRs10 million and ordered the respondent to:

  • inform the public of the falsity of its advertising claims through ads in English and Urdu daily newspapers and on television channels for one week from said order; and
  • file a compliance report with the Competition Commission in this regard.

Failure to comply with the commission's directions could result in the imposition of additional penalties.

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.

For further information on this topic please contact Sanaya F Vachha at Vellani & Vellani by telephone (+92 21 3580 1000) or email (sanaya.vachha@vellani.com). The Vellani & Vellani website can be accessed at www.vellani.com.